530 F.3d 204 (3rd Cir. 2008), 07-1811, Toledo Mack Sales & Service, Inc. v. Mack Trucks, Inc.

Docket Nº:07-1811.
Citation:530 F.3d 204
Case Date:June 17, 2008
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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530 F.3d 204 (3rd Cir. 2008)




No. 07-1811.

United States Court of Appeals, Third Circuit.

June 17, 2008

Argued March 5, 2008.

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Robert L. Byer [Argued], Wayne A. Mack, Jr. , J. Manly Parks, James H. Steigerwald , David A. Degnan , Duane Morris, LLP, Philadelphia, PA, for Appellant.

Barbara M. Mather [Argued], Jeremy Heep , Christopher J. Huber , Barak A. Bassman , Pepper Hamilton LLP, Eighteenth & Arch Streets, Philadelphia, PA, for Appellee.

Before: BARRY , JORDAN , and HARDIMAN , Circuit Judges.


JORDAN , Circuit Judge.

Toledo Mack Sales and Service, Inc. (“Toledo" ) appeals from an order of the United States District Court for the Eastern District of Pennsylvania granting judgment as a matter of law in favor of Mack Trucks, Inc. (“Mack" ) on Toledo's claim under § 1 of the Sherman Antitrust Act (“Sherman Act" ). Toledo also appeals the District Court's grant of summary judgment for Mack on Toledo's claim under the Robinson-Patman Act (“RPA" ), and its grant of judgment as a matter of law for Mack on Mack's counterclaim for misappropriation of trade secrets. Because we conclude that Toledo presented at trial enough evidence to permit the Sherman Act claim to go to the jury, we will vacate the District Court's disposition of that

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claim and remand for further proceedings. We will affirm the District Court in all other respects.

I. Jurisdiction and Standard of Review

The District Court exercised jurisdiction over Toledo's claims pursuant to 28 U.S.C. § 1331 , and over Mack's counterclaim pursuant to 28 U.S.C. §§ 1332 and 1367(a) . We have jurisdiction under 28 U.S.C. § 1291 . We exercise plenary review over a district court's decision to grant judgment as a matter of law. Northview Motors, Inc. v. Chrysler Motors Corp., 227 F.3d 78, 88 (3d Cir.2000) . Judgment as a matter of law is appropriate “only if, viewing the evidence in the light most favorable to the nonmovant and giving it the advantage of every fair and reasonable inference," a verdict in favor of the nonmovant cannot be supported by legally sufficient evidence. Fair Hous. Council v. Main Line Times, 141 F.3d 439, 442 (3d Cir.1998) (citations omitted).

Our review of a district court's order granting summary judgment is also plenary. Assaf v. Fields, 178 F.3d 170, 171 (3d Cir.1999) . Summary judgment is appropriate if “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c) . As in our review of an order granting judgment as a matter of law, we must, when reviewing a summary judgment order, view all of the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 456, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992) .

II. Background

A. Mack and Toledo

Mack manufactures a variety of heavy-duty trucks and is said to enjoy significant power within the market for such vehicles.1 It distributes and services its products primarily through a nationwide network of authorized dealers, each of which is assigned a geographic region called an “Area of Responsibility" (“AOR" ). A dealer's AOR is not exclusive, and Mack's stated policy is that dealers are free to sell anywhere in the country.

Most of Mack's trucks are made to order from various chassis, engine, and transmission options. When a potential customer contacts a Mack dealer, the dealer obtains a list of specifications from the potential customer and submits the list to Mack. Mack then informs the dealer of the price at which it is willing to sell the requested truck to the dealer. An important aspect of that price is a transaction-specific discount known as “sales assistance." The amount of sales assistance that Mack offers a dealer on a particular transaction varies according to the nature of the relationship between the dealer and the customer, the number of trucks ordered, potential competition, and other factors. Dealers' requests for sales assistance are submitted to a Mack District Manager, who has the authority to grant sales assistance up to a certain dollar amount. Requests for additional sales assistance beyond that amount typically must be submitted for approval by a Regional Vice President. Requests for sales assistance beyond the amount that a Regional

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Vice President may authorize must be approved by Mack's Controller. Of course, the greater the discount that Mack provides to the dealer, the lower the price that the dealer can profitably charge the customer. Once Mack tells the dealer how much the dealer will have to pay for a truck, the dealer then prepares a quote for the potential customer, using, among other things, the price it must pay Mack to fulfill the customer's order. If the customer accepts the dealer's quote, the dealer orders the truck from Mack and Mack custom-builds it according to the customer's specifications. The dealer then buys the truck from Mack and sells it to the customer. However, if the customer does not accept the dealer's quote, the dealer usually does not buy the truck from Mack and no sale takes place.

Often, potential customers will solicit bids from multiple Mack dealers as well as from Mack's competitors. Accordingly, Mack dealers compete against both non-Mack dealers and, at least in theory, among themselves. Because the amount of sales assistance Mack offers to a dealer on a potential sale is a significant factor in determining the price at which the dealer will in turn offer to sell a truck to a potential customer, it is also a significant factor in determining whether a potential customer decides to accept a dealer's quote.

Toledo was an authorized Mack dealer located, as one might guess, in Toledo, Ohio. Dave Yeager has owned Toledo since 1982. After acquiring Toledo, Yeager implemented a business strategy that focused on offering the lowest possible price to his customers. Until Mack terminated Toledo's status as an authorized dealer, Toledo aggressively pursued its low-price sales strategy throughout the country, competing on price against other Mack dealers for sales in other dealers' AORs.

B. Toledo's Sherman Act Claim

Toledo alleges that, by competing on price against other Mack dealers, it began to undermine an unlawful conspiracy that Mack and the dealers had developed to keep prices on Mack products artificially high.2 According to Toledo, this conspiracy has two parts. First, Toledo claims that, beginning in the mid-1980s, individual Mack dealers entered into “gentlemen's agreements" not to compete with each other on price. Second, Toledo alleges that, beginning in 1989, Mack entered into an agreement with its dealers that it would delay or deny sales assistance to any dealer who sought to make an out-of-AOR sale, thereby protecting dealers that sell within their own AORs. Toledo argues that the combination of the horizontal collusion among dealers and the vertical collusion between Mack and the dealers violates § 1 of the Sherman Act because it prevents Mack dealers from competing with one another, thereby allowing Mack and its dealers to maintain artificially high prices on the sale of Mack trucks. Toledo also asserts that Mack's decision to deny it sales assistance on out-of-AOR sales violates the prohibition on discriminatory pricing embodied in the RPA. At trial, Toledo presented evidence to show the

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existence of the alleged horizontal and vertical agreements.

1. Toledo's Evidence of Agreements Among Mack Dealers

Toledo offered testimony that Mack dealers agreed not to compete with one another. Yeager, Toledo's owner, testified that, while he was attending a dealer meeting in the late 1980s, two Mack dealers from New Jersey approached him and told him that “the way it works" in New Jersey is that “dealers don't compete on price." (App. at A513.) Toledo also introduced deposition testimony by Jack Lusty, a former District Manager for Mack who had been responsible for supervising Toledo from 1998 to 2002. Lusty said that, despite Mack's official policy of allowing dealers to sell anywhere, Mack dealers had unwritten agreements not to compete with each other. Finally, Toledo introduced copies of handwritten notes taken at a Mack sales meeting in 1999 by a consultant named Hallie Giuliano. At that time, Giuliano was working on a project for Mack and, according to her notes and an affidavit she signed later, she heard Ron Gerhard, a Mack employee, say at the sales meeting that “there was a ‘gentlemen's agreement’ among Mack truck dealers that they would sell only in their own areas of responsibility. [Gerhard] also stated that some Mack truck dealers did not honor the ‘gentlemen's agreements' and engaged in sales efforts in other Mack dealers' territories." (App. at A3537.)

2. Toledo's Evidence of an Agreement Between Mack and Mack Dealers

Toledo also presented three categories of evidence to show that Mack agreed with its dealers that it would deny sales assistance on sales a dealer tried to make outside of that dealer's AOR. First, Toledo introduced recordings and notes of conversations between Yeager and various Mack executives referring to an informal policy against out-of-AOR sales. Second, Toledo introduced evidence that, in 1989, Mack adopted an official policy of denying sales assistance on out-of-AOR sales. Toledo also...

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